Yugoslavia and the profits of doom

This article was first published on 100reporters.com, an investigative journalism website.

As the nation once called Yugoslavia collapsed into a deadly maelstrom through the 1990s, the world largely stood mute in the face of unspeakable atrocities: ethnically-driven mass murders, concentration camps and rape as a weapon of war. Conventional wisdom blamed the Balkan nations for their own blood-soaked disintegration, which took more than 130,000 lives.

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The principal stand against the horrors unfolding in the region came through the United Nations Security Council, whose members banned weapons sales to the region.

Now, nearly 20 years later, new facts are emerging that cast a different light on that narrative, and show that other nations had a hand in stoking the deaths and destruction that engulfed the Balkans.

A three-year investigation by a Slovenian team of journalists backed by reporters from six countries, who analysed thousands of documents obtained through Freedom of Information requests, reveals that many countries — including Russia, which had voted for the arms embargo — were actively involved in violating it. Many in these nations earned millions of dollars selling arms and ammunition to the all the warring parties.

Countries on multiple continents were engaged in the arms trade – or in financing it. Bulgaria, Poland, Ukraine, Romania and Russia were all export countries for weapons to the conflict. The headquarters for a huge logistics operation was in Vienna. Financial transactions were executed by a Hungarian bank. Arms smugglers used companies registered in the off-shore haven of Panama. The United Kingdom sent military equipment to former Yugoslav republics and provided loans for arms purchases, as did Germany.

"Such secret and illegal trade allowed some individuals to become immensely wealthy," said Zdenko Cepic, a historian at the Institute for Contemporary History in Ljubljana and an expert in the disintegration of Yugoslavia.

The newly-released documents, obtained from intelligence service files and criminal police records, provide specific details on an arms-smuggling scandal that has frequently been the subject of rumor and misinformation in the Balkans.

While there was a widespread awareness of illegal arms shipments during the conflict, the details remained a mystery. Arms dealers, government officials and others always denied wrongdoing, and no one was held accountable in a post-war justice system that often bowed to political pressure.

Only now are the full facts of the countries and people involved in this illicit trade becoming public.

The investigation shows that Russian weapons in vast quantities were sold through many hidden middlemen during the UN arms embargo. One of the most important of these go-betweens was a Greek citizen, Konstantin Dafermos, who operated in Vienna during those years. Dafermos could not be reached by 100Reporters for this story.

Between 1991 and 1992, when the trafficking was in full swing, some 20 ships loaded with weapons secretly arrived in the Slovene port of Koper, in violation of the UN embargo banning the delivery of arms to the region. The ships were unloaded and the cargo was quickly forwarded to battlefields in Croatia and Bosnia and Herzegovina.

Those logistic operations were conducted by military and civilian secret services in all three countries, according to the documents. In addition, Italian, Albanian and Russian mafia participated in some actions.

"The port of Koper was a good opportunity to evade the arms embargo," added Cepic, the historian. "It was not controlled by international inspections. Supervision of shipments has been done by Slovenia itself, which allowed the import of weapons from other European countries."

The UN arms embargo was intended to keep weapons out of the region. But it came under intense criticism for essentially cementing the arms advantage held by Serbia, while hindering the ability of its victims in Slovenia, Croatia and Bosnia and Herzegovina to defend themselves against Serbian aggression.

With no where to turn, these nations sought weapons for their defense from a shadowy network of arms traders tied to organised crime and from countries, including Russia, that had voted for the UN arms embargo.

While the weapons purchases were arguably necessary for the defense of Yugoslavia's former provinces, they also fueled aggression and atrocities in their turn. The weapons Croatia purchased, for example, allowed it to defend itself against Yugoslav People's Army offensives and to regain territory in 1995 that had been held by Serbian rebels. But Croat military leaders have also been convicted of murdering ethnic Serbs and deporting thousands of them from Croatia, while both Serbs and Croats have been implicated in atrocities against the Muslims of Bosnia.

As a result, Cepic explained "this illegal arms trade partially influenced the result of the wars in the former Yugoslavia."

It also shaped these countries long after the guns fell silent. The underworld ties put intelligence officers in these newly independent countries on the wrong side of the law. They led to business negotiations being conducted with suitcases of cash, bid up the price of arms and laid the groundwork for a pervasive climate of corruption among public officials that persists today.

The story of weapons trafficking in the Yugoslav wars begins in 1991 - 20 June to be exact — when the first strategically important shipment of arms arrived in Slovenia from the Bulgarian port of Burgas, only a week before the first military clashes in the former Yugoslavia. The Danish ship, Herman C. Boye, arrived loaded with 5,000 assault rifles, millions of rounds of ammunition and, most importantly, anti-aircraft and anti-armour missiles worth 7.8 million Deutschemarks, or around $4.3 million at the time.

The shipper of these weapons was a Bulgarian state arms company, Kintex, which is based in Sofia, and the middleman was an Austrian company, Stalleker GmbH from Vienna. At the same time, the British company Racal sent modern military radio stations with encryption capabilities to Slovenia in a deal worth £5 million.

This successful transaction caught the eye of arms dealer Konstantin Dafermos. The Greek businessman worked with Scorpion International Services, a Russian military contractor that is registered in Panama and had offices at the Vienna airport. Scorpion became one of the main conduits for smuggling arms to the Yugoslav frontlines. Debit-credit notes of bank accounts opened at the Central-European International Bank in Budapest show that Scorpion received more than $80 million dollars from Slovene, Croatian and Bosnian customers.

Records from the Budapest bank show that at least $9.4 million, and possibly $19 million, were transferred from Dafermos' account to a Polish state-owned company called Cenrex. The general manager of Cenrex was a lieutenant colonel in the Polish military intelligence service, Jerzy Dembowski, who went by the code-name of Wirakocza. From the Polish port of Gdynia, ships loaded with arms, including some containing Soviet army ammunition supplies, crossed the Adriatic sea and sailed to the Balkans beyond.

Other records show that three ships from the Romanian port of Constanta shipped 200 containers filled with 3,500 tons of weapons in December 1991 and January 1992. Cargo that arrived in the port of Koper was then sent to Croatia.

A more important smuggling channel started in 1992, with shipments from the Ukrainian port of Mykolaiv. This channel was under the control of the mafia of Odessa, which sent eight ships with more than 12,000 tonnes of weapons to Croatia.

Documents declassified in Slovenia show that the first two shipments passed through the Slovene port of Koper. A ship, the Island, made the journeys, sailing with 96 containers of arms in October and November 1992. From Koper, the weapons continued over land to Croatia. Debit-credit notes confirmed that $60 million went into Dafermos’s account from Croatian customers who were buying arms through this channel. From that amount, some $40 million was transferred further to other arms sellers. One of the companies, Global Technologies International, is registered to Dmitri Streshinsky in Panama.

These arms shipments continued with little notice. But, in 1994, the last ship of eight, the Jadran Express, was intercepted and halted by the NATO fleet in the Adriatic. This interception led to a trial in Italian city of Turin. Those on trial included Dafermos, Streshinsky, Russian oligarchs Alexander Zhukov and Leonid Lebedev, British banker Mark Garber and Yevgeny Marchuk, a former prime minister of Ukraine and former head of the country’s secret police. Ex-KGB officials, and others were also charged. Prosecutors in Turin described Konstantin Dafermos as the mastermind of the operation, in which phony documents showed the arms going to Africa instead of the Balkans.

All were later acquitted by the court.

According to newly-available documents, Dafermos sold hundreds of Russian anti-aircraft and anti-armour missiles to Slovenia. Three ships that arrived from Poland and Ukraine in 1991 and 1992 were found to have contained 52 modern anti-aircraft launchers SA-16 Igla with 400 missiles, 50 anti-armour launchers AT-4 Fagot with 500 missiles and 20 anti-armour launchers AT-7 Metis with 200 missiles. This deal was worth $33.3 million. A Slovene agent said in a 2010 interview in the Slovene daily Dnevnik that these arms sales were a state-to-state deal, using a middleman company.

Some of the Russian missiles were paid for with a German loan, which was arranged through a proxy company Unimercat, based in Munich. Both the former Slovene Minister of Defense and the Minister of Finance explained in interviews with the Slovene newspaper Delo that a "Western country," which they did not identify, gave loans of more than DM60 million, or $37 million, of which $28 million went for arms purchases during the UN arms embargo.

For his part, Dafermos even offered an entire state-of-the-art mobile anti-aircraft system, the SA-8 Gecko, to Slovenia in January 1992. This deal was cancelled even though Russian and Slovene experts had a secret meeting in Vienna to discuss the arrangement.

By the spring of 1994, the president of the Russian Liberal-Democratic party Vladimir Zhirinovsky visited Slovenia and demanded payment for shipment of Russian gas masks totaling $9 million from the then defence minister Janez Jansa, who was in charge of arms smuggling in his country. Shipment of the gas masks had been organized by Dafermos' then-middleman Nicholas Oman.

Partners in Dafermos' other Panama companies - under the Scorpion name - show connections to Russia. Dafermos' partner in a company called Scorpion Navigation, was Vladimir I. Ryashentsev, a senior KGB officer. Today, Scorpion International Services is the exclusive representative of Rosoboronexport, the Russian state-owned corporation that sells weapons for export.

In February 1995, Slovene authorities charged Dafermos, along with Slovenia's Jansa and Interior Minister Igor Bavcar, with the illegal shipment of 13,000 assault rifles and ammunition during the war in Croatia.

Under questioning by Austrian police in 1995, Dafermos denied any involvement in shipping arms and military equipment. He said that he only imported "protective vests, uniforms and military boots" from Russia.

The case never went to trial in Slovenia. In a footnote, both Slovene former ministers are being prosecuted for different crimes today, however. Slovenia's former and likely future prime minister, Jansa, is currently facing trial for bribery in an arms deal worth $364 million and Bavcar, the former interior minister, faces charges of money laundering.

As for Dafermos, he is not doing too badly. In Austria, he now runs Scorpion, the Russian military contractor, from an exclusive location between Vienna's twin temples to art and music, the Albertina and the Viennese Opera.

Blaz Zgaga is the co-author, with Slovene journalist Matej Surc, of the trilogy In the Name of the State, which looks into the Balkans arms trade. Their investigation was co-funded by European Fund for Investigative Journalism; cross-border co-operation was additionally financed by Danish organisation Scoop

WAZ.EUobserver asked its correspondents to engage in a bit of crystal ball gazing for their respective special interest countries in South Eastern Europe. We examine how the region will fare and where these countries are likely to stand in relation to the EU by the end of 2011. These short forecasts by our main contributors are the last text provided for WAZ.EUobserver.

The EU has urged countries in the Western Balkans to intensify their fight against organised crime, trafficking and corruption. Ministers said they should join forces to combat these international crimes.